Virgin Active Sold to Billionaire Wiese as IPO Plan Scrapped

Chris Spillane and Janice Kew

April 16, 2015, 2:33 AM EDTUpdated on April 16, 2015, 11:23 AM EDT

Virgin Active agreed to be bought by the investment company owned by South African billionaire Christo Wiese for 682 million pounds ($1 billion), prompting the British health-club chain to cancel plans for a share sale.

Wiese’s Brait SE will take an 80 percent stake in Virgin Active, valuing the gym chain at 1.3 billion pounds, Brait said in a statement on Thursday. British entrepreneur Richard Branson’s Virgin Group will retain a 20 percent stake, while London-based private equity firm CVC Capital Partners Ltd. will sell its entire shareholding.

“Brait has been tracking Virgin since 2011, so we were able to move quickly on this opportunity,” Brait’s South Africa Chief Executive Officer John Gnodde said by phone. Virgin Active is “very profitable and extremely cash generative,” he said.

Brait has been seeking targets for a 26.4 billion rand ($2.2 billion) windfall it received from the 2014 sale of its stake in African retailer Pepkor Holdings Pty Ltd. as investors pressured the company to spend the cash. The Virgin Active deal represents less than 40 percent of the Pepkor funds, and Brait will seek further acquisitions in the South African and European food and consumer-goods markets, Gnodde said. Other Brait investments include U.K.-based food retailer Iceland.

Brait shares gained 4.3 percent to 90.45 rand by the close in Johannesburg, the biggest jump since Oct. 31 and an all-time high. The stock has gained 15 percent this year, valuing the company at 47 billion rand.

Virgin IPO

Virgin Active had appointed five banks to handle an initial public offering of the company in Johannesburg by the end of June, people with knowledge of the matter said in February. The IPO plans were canceled on Wednesday night after the Brait deal had been agreed to, according to Gnodde.

The IPO “was ditched,” he said. “It’s not going to happen.” Brait has an option to increase its stake above 80 percent although has no immediate plans to do so, Gnodde said.

Founded in the U.K. in 1999, Virgin Active has 267 clubs in nine countries with more than 1.3 million members, according to its website. It has in excess of 110 outlets in South Africa, more than in any other country, and generates about 60 percent of profit from Africa’s most industrialized economy. Sales were about 630 million pounds in 2014, according to the Brait statement.

High-End Gyms

The deal will help the company expand its network of health clubs in the Asia-Pacific region beyond Singapore and Thailand as well as in existing markets including the U.K., Gnodde said. Brait will “keep it very high end” while also seeking to open more lower-cost gyms under the Red brand.

“While today’s transaction is testament to the huge amount the business has already achieved, we believe that its future is more exciting,” Branson, billionaire and founder of Virgin Group, said in one of the statements.

Wiese, South Africa’s fourth-richest man with a fortune of about $6.9 billion, owns about 35 percent of Brait. Steinhoff International Holdings Ltd. agreed to buy Pepkor for 62.8 billion rand on Nov. 25. Wiese remains a minor shareholder in the enlarged business.

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